I am and have been long DUG since Mid April. Overall this has been a money-losing short for me despite all the trading I have done around it. I still believe it will move upwards. Oil seems to be in a topping mode. Yesterday's action was very poor, with oil opening up $4 and closing down over $1. Another repeat and I say the odds strongly favor a correction in oil, which could bring energy securities down with it, save only PERHAPS, refiners due to widening spreads in that scenario. However, refiners also do tend to trade with oil half the time, so...
I think earnings will be great, however, cost inflation may just grow faster than the earnings. YOY comparisons should be fine, however, as that cost inflation creeps up the sequential and annual comparisons will become harder harder. At that point I think service companies are going to be most vulnerable. If the market anticipates that there ought to be a correction. On the flip side, this is one of the few sectors that has been working all year, so there has been a concentration of money moving into it and this crowded trade may just take a while to unwind when that time comes.
Notice the strong divergence on CMF in both charts below AND the falling volume with price not keeping up. Kind of scary since it has been a while since I have seen this. The divergence will be resolved either way, so get ready.
stockcharts.com
stockcharts.com
Best regards, |
